John Phillips is financial services director at Kinleigh Folkard & Hayward
There are two things that will improve the housing market in 2013 – the reintroduction of mortgage indemnity guarantees (MIG) for high LTV lending, and growth in interest only lending. Neither should be undertaken lightly or indeed universally but there are reasons why these measures in London and the South East would go a long way to helping younger buyers.
Fundamentally, in the South East there is not enough supply for the demand. Whether that demand is as a result of UK national buyers and or foreign buyers, the market has proved resolutely robust over the last five years and warrants more confidence than many current products offer. Certainly lenders’ appetite for lending in the South East is greater than in other parts of the country, however, young people in the South East still struggle to buy.
In its previous incarnation, MIG was an imperfect execution of a good idea, costing borrowers a small fortune while making a packet for lenders and protecting them, rather than the consumer. A way forward would be for consumers to arrange their cover to meet lender requirements. By injecting transparency and choice into the process, there is no good reason why this idea could not be made to work affordably and cover the risk to all parties without impoverishing the borrower.
This would help higher LTV lending but combined with interest only mortgages would offer real being power to younger people. The Mortgage Market Review very specifically did not ban interest only mortgages and, for young professionals in the South East, this could remain a viable and appropriate strategy over the coming months that would provide a real boost to the market.
The key to 2013 will not be more exciting products but getting some of the basics right and out to more people.